Kit Needham - CMU...Angels: Majority of Startup Funding • $22.5B • ~66,000 deals • 42%...

Entrepreneurship 101

Kit Needham

Not all Startups are the Same

Small Business/Life-Style Ø Known business

examples to learn from Ø  Funded by banks or

stockholders Ø Business plan Ø Sustain a particular

level of income Ø Provide dividends or

increased stock price

Investment/Exit Ø Untested business

model with a high degree of uncertainty

Ø  Funded by investors (angels and VCs)

Ø Business model Ø  Grow big quickly and

sell (exit) Ø Provide a 5x-10x return

to the investors

The Players

•  Incubators •  Accelerators •  TBEDs

Incubators

•  Where the commercialization plan ‘hatches’ – Mentoring/coaching/guidance – Access to materials –  Introductions to advisors, domain expertise – May provide space – May provide micro-grants

•  Goal – get initial seed funding

Pittsburgh: A Community of Innovation FOR INVESTMENT/EXIT START-UPS

Idea Development Startup Early Growth Rapid Growth EXIT

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I F D O E U A N D R Y

I I N N N S O T V I A T T U I T 0 E N

Accelerators

•  Fixed term, cohort-based programs – Provide mentorship and educational

components – Highly competitive to get in – Get seed investment ($20k-$50k) in exchange

for equity •  Goal – “Demo Day” to attract follow-on investment •  Examples: AlphaLab/Gear, Idea Foundry, Tech

Stars, Y Combinator, DreamIt Ventures, etc

Pittsburgh: A Community of Innovation Idea Development Startup Early Growth Rapid Growth EXIT

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Idea Foundry HEALTHCARE & LIFE SCIENCES ENTERTAINMENT & EDUCATION SOC. ENTERPRISES WATER

AlphaLab SOFTWARE

AlphaLab Gear HARDWARE &

ROBOTICS

THRILLMILL

DemandCo


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Pittsburgh: A Community of Innovation


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AlphaLab SOFTWARE


ROBOTICS

THRILLMILL

THINKTIV

PITTSBURGH LIFE SCIENCES GREENHOUSE

INNOVATION WORKS

IT

MEDICAL DEVICES


AC

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S Idea Foundry

MONEY/FUNDING Investors

•  INVESTORS –  FRIENDS & FAMILY (& FOOLS) –  CROWDFUNDING –  ANGELS and ANGEL GROUPS –  SUPER ANGELS –  VENTURE CAPITALISTS

Angels vs VCs

Angels Ø High net-worth

individuals i.e. their own money)

Ø  Tend to invest locally Ø  Tend to invest early

($25k - $50k) Ø Often form Angel

Groups to research and co-invest in deals (e.g. BlueTree)

Venture Capitalists Ø Create a fund using

other people’s money Ø Seek deals from

everywhere and often require them to relocate nearby

Angels: Majority of Startup Funding

•  $22.5B •  ~66,000 deals •  42% seed/startup •  55% early stage •  ~ 318,500 individuals

Angel Investors 2011

•  $29B •  ~3,750 deals •  3.5% seed/startup •  68% later/expansion capital •  Total 791 firms (not all active)

Venture Capital 2011

Sources: UNH Center for Venture Research, PwC MoneyTree and NVCA

$9.5B

$12.4B

$0.45B* $0.22B* $1.0B

$8.4B $9.8B $9.9B

*es$mated

MONEY/FUNDING Terms

Terms -  Seed Funding -  Series A, B, etc. -  Valuation -  Convertible Debt -  10x return -  Exit (Sale or IPO – Initial Public Offering)

People •  Steve Blank – 4 Steps to Epiphany

“Get out of the building” •  Eric Reis – The Lean Startup

– MVP (Minimal Viable Product) – Feedback Loop

Build

Learn Measure

People and Terms

•  Steve Blank – “Get out of the building” •  Eric Reis – “The Lean Startup” •  Business Model Canvas

Pittsburgh: A Community of Innovation Funding for investment/Exit Startups


*FEDERAL GOVERNMENT Funds research

FEDERAL GOVT SBIRS/STTRs

Funds startups STATE: DCED

Funds IW and subs, PLSG

*FOUNDATIONS Funds startups

ANGELS BlueTree Allied Angels

Keiretsu Forum Funds startups

VCs: Adams, Birchmere, PEP, Draper, etc. Funds startups

FUN

DIN

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Local: URA Funds Startups

PUBLIC SECTOR;

PRIVATE SECTOR

CROWD FUNDING


LifeStyle and Investment/Exit Startups Idea

Development Startup Early Growth Rapid Growth Maturity

Chatham’s Center for Women’s Entrepreneurship (CWE) (CWE Small Business Development Centers- Pitt; Duquesne

Innovation Practice Institute –Pitt Law School (Start Smart) with CMU

Education






Education Mentoring

SCORE

CWE

Powerlink

IEE - Pitt






Education Mentoring

SCORE

CWE

Space/Support Services

Riverside Center for Innovation

Revv I, II, III?

Startup Town

The Beauty Shop

Former Paramont Studio

Powerlink

IEE - Pitt






Education Mentoring

SCORE

CWE

Resources Space/Support Services

Riverside Center for Innovation

Pgh Tech Council

Tech Shop

Revv I, II, III?

Startup Town

The Beauty Shop

Former Paramont Studio

Powerlink

IEE - Pitt

Q&A

[email protected]

Pittsburgh: A Community of Innovation FOR INVESTMENT/EXIT START-UPS


UN

IVER

SITI

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leve

ragi

ng $

$ bi

llion

$$ re

sear

ch a

nd

stud

ent i

nnov

atio

n

O L Y M P U S

Incu

bato

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AlphaLab SOFTWARE


ROBOTICS

THRILLMILL

THINKTIV

PGH LIFE SCIENCES GREENHOUSE

INNOVATION WORKS

IT

MEDICAL DEVICES


AC

CEL

ERAT

OR

S

GOVERNMENT FED SBIRS

STATE DCED

FOUNDATIONS

ANGELS BlueTree Allied Angels

Keiretsu Forum

VCs: Adams, PEP, Birchmere, Draper,

FUN

DIN

G

Kit Needham - CMU...Angels: Majority of Startup Funding • $22.5B • ~66,000 deals • 42%...

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